In a global environment of more expensive liquidity enterprises they face extremely difficult and urgent political decisions that will determine their course in 2023 and beyond. This follows from the latest release of the regular EY Geostrategic Outlook 2023 report.

According to the report, the trend towards continued liberalization of world trade and ever-increasing globalization is receding, and in the emerging new global business environment, geopolitical considerations now often prevail over purely economic considerations. The report identifies 10 powerful interdependent global trends emerging from the events of recent years that will have a significant impact on the business environment in 2023.

Initially, the war in Ukraine resulted in the largest shift in geopolitical relations since the end of the Cold War, with serious implications for Europe and, if it escalated further, for world peace as well as domestic stability in Russia. In addition, the global system of cooperation between the powerful poles of the planet is giving way to increasing competition and the gradual separation of the US and European economies from the Chinese economy. While the transition to a bipolar world increases pressure on small economies to join the geopolitical bloc, a number of mid-sized world powers are choosing to diversify and increase their negotiating position. Typical examples are India, Brazil, Saudi Arabia and Turkey.

The pursuit of economic self-sufficiency, especially in strategic sectors of the economy, is becoming a central strategic choice for the great powers of the planet. In particular, in the EU, the implementation of the strategic autonomy program is moving forward: in the US, the Inflation Reduction Act aims to strengthen domestic energy production, while in China, the “dual circulation” policy prioritizes domestic energy consumption but seeks to keep the economy open to foreign investment. . According to the EY report, technology is becoming the central field of geopolitical competition. The war in Ukraine actually cut Russia off from developed market technologies, and a number of countries led by the US, EU, etc. and Japan are seeking to further restrict China’s access to critical technologies, including semiconductors. At the same time, energy self-sufficiency is rising to the top of the agenda of governments, especially in Europe, while in terms of ESG indicators, governments and companies are adopting ESG policies at different speeds, confirming that the path to achieving goals for the environment, society and controls will not always be linear. An energy crisis could delay the green transition while dilemmas arise between the goal of the energy transition and the sustainability of fossil fuel dependent communities.

Referring to the stagflation paradox, the report notes that over-indebted countries are expected to face significant challenges due to rising borrowing costs, while emerging markets will also suffer due to the high share of food and energy in household consumption spending. . Finally, the cost of food can lead to political instability. EY notes that food prices soared to historically high levels in March 2022, while a third of the world’s population still does not have access to enough food. The report concludes that five strategies should be prioritized for businesses. Among them, managing increased costs, reviewing the ecosystem of suppliers, exploring opportunities in “friendly” markets, systematic analysis of alternative scenarios, etc.